On Friday, Saddam Hussein called on his people to rise up and defend the nation against a new U.S.-led attack and promised that Iraq's enemies would face "suicide" at the gates of his capital.

A trio of disappointing economic reports propelled the bond market.

The University of Michigan's mid-month report on consumer sentiment for January fell to 83.7 from 86.7 in December, according to Dow Jones Newswires. The confidence reading fell short of economists' expectations of 86.4.

Meanwhile, the Federal Reserve reported that production in the nation's industrial sector unexpectedly dipped by 0.2 percent in December, more than erasing a 0.1 percent gain the previous month. Analysts had forecast a 0.2 percent increase.

And the U.S. trade deficit grew to a record $40.1 billion in November, reflecting Americans' ravenous appetite for foreign-made goods, especially toys, TVs and clothes. Analysts were predicting a smaller $36.4 billion imbalance.

The benchmark 2-year note rose 3/32 point to yield 1.69 percent, down from 1.73 percent on Thursday. Intermediate maturities were up from 1/8 to 15/32 point.

Yields on one-month Treasury bills were 1.16 percent as the discount fell 0.01 percentage point to 1.14 percent. Yields on three-month Treasury bills were 1.17 percent as the discount fell 0.01 percentage point to 1.15 percent. Six-month yields were 1.21 percent, as the discount fell 0.01 percentage point to 1.19 percent.

Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.

The federal funds rate, the interest on overnight loans between banks, fell to 1.19 percent from 1.25 percent on Thursday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 9/32 point to 108 3/8. The average yield to maturity fell to 5.12 percent from 5.14 percent on Thursday.